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Chance to plan for a better city

Kevin Stanley

Sydney's urban development faces many challenges. We're reminded while we commute to work or travel across the metropolitan area that land-use planning and transport infrastructure have struggled to keep pace with one another. Sydneysiders know the problems. They want answers and action to make this city even better.

The metropolitan plan for Sydney is open for comment and there's an opportunity to ensure its successful implementation by harnessing trends in global capital allocation. Global investors are searching for safe investment locations and Australia is towards the top of the list of preferred destinations. This has been true since the global financial crisis; a time when the number of safe investment destinations has declined and Australia has moved up the rankings and attracted offshore investment, into mostly passive property assets.

But offshore institutional investors have a large appetite and are typically looking for $200 million or $500 million-plus passive investments of the highest quality; assets of this size and type rarely hit the market in Australia. This country is, after all, small by global investment standards, but on the other hand, investment can easily have a big impact in this small pond.

The response to the scarcity of these assets is to fund development, typically in a joint venture arrangement with domestic expertise.

Examples in Sydney are Barangaroo, where the Canadian Pension Plan Investment Board has linked with Lend Lease to kick-start the redevelopment, and at 8 Chifley Square, the new office building facilitated by Mirvac, where Singaporean investor K-REIT has taken a position on the soon-to-be-finished property.

The opportunity exists now to turn joint ventures toward growth challenges. To make the most effective use of available capital (domestic and global), the next metropolitan plan should nominate just three centres outside the city centre for large-scale, mixed-use development; any more and global investors will be concerned about the dilution of their returns through increased competition.

So, forget the ''city of cities''. For market acceptance, the most effective use of existing and future transport access, and to build on existing critical mass, these centres should be: Macquarie Park, Parramatta and Green Square. This would also spread the commuter transport task, taking the pressure off the city centre, reducing the need for public transport investment to be so focused on just one major destination.

Kevin Stanley is an independent adviser in real estate and urban planning. kevin@kevinstanley.com.au.